HONG KONG, March 5 (Reuters) - Chinese footwear retailer Belle International has hired Bank of America Merill Lynch (BAML) to help prepare for a Hong Kong listing of its sportswear business this year, said people with direct knowledge of the matter.

The firm aims for a valuation of at least HK$20 billion ($2.55 billion) to HK$25 billion for the unit, which distributes brands such as Nike and Adidas, said two of the people.

The divestiture comes nearly two years after BAML advised a consortium led by Hillhouse Capital Group and CDH Investments to take Belle private in a $6.8 billion deal completed in July 2017, as traditional retailers battled online competition.

The Shenzhen-based firm invited a group of investment banks to pitch for the listing late last year, said two of the people, who declined to be identified as the information was private.

Belle did not respond to an emailed request for comment and did not answer phone calls. BAML, Hillhouse and CDH declined to comment.

The initial public offering (IPO) plan comes as the value of China's sportswear market is set to grow to $58 billion in 2023 from $40 billion last year, estimated market researcher Euromonitor.

Belle controlled a 6.7 percent share of China's apparel and footwear specialist retailer segment, with Nike Inc and Adidas AG being the top two sportswear companies in China last year, Euromonitor data showed.

Established in 1991 as one of China's earliest shoe retailers, Belle produces shoes under own brands such as Belle and Staccato, and distributes foreign labels such as from Puma SE, Moussy and Converse.

The retailer experienced "unprecedented challenges", particularly from e-commerce and shopping malls that competed with its main sales channels in department stores, it said in an April 2017 filing when announcing the buyout reut.rs/2tOssdK.

Hillhouse, which has invested in Chinese technology firms including Tencent Holdings Ltd and JD.com Inc, owned 57.6 percent of Belle after the buyout, with CDH holding 11.9 percent, Belle said in July 2017. A group of Belle managers owned the remaining 30.5 percent.

Belle has for years hoped to boost competitiveness in e-commerce as Chinese consumers increasingly shop online.

It directly managed 20,716 retail outlets in China at the end of February 2017, including 13,062 footwear and 7,654 sportswear and apparel outlets. ($1 = 7.8489 Hong Kong dollars) (Reporting by Kane Wu and Julie Zhu; Editing by Christopher Cushing)